The method of negotiation

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Executive Summary

“Negotiation is an unconscious process” (Gary P. Ferraro, 2002). Since birth, a child negotiates with his parents for chocolate, to get extra time to play and to get gifts. As he grows old, negotiation process continues with teachers, class-mates, friends, bosses, colleagues, neighbours and spouse. Thus, without any realization, this process continues and the method of negotiation develops within his cultural boundaries. As people of different cultures differ in their attitudes, morals, behaviours, values and beliefs; similarly, their negotiation styles are coloured by cultural assumptions (Gary P. Ferraro, 2002). Today, the world is shrinking to a “global village”. Due to this, people from various countries meet people from different cultures, to trade/do business, travel, study, marry etc. The businesses go global as they see their own domestic market to be dwarfed by the global marketplace. However, international cooperation can be beset without proper communication.

This paper briefs reader on negotiation styles and strategies adopted by Japanese and Americans due to their individual cultural orientation. These negotiation techniques are based on their learned processes while interacting with the environment. PEST Analysis (John Kew and John Stredwick, 2008) of both the countries is done in order to well understand both the countries and their environmental aspects.

This paper also canvasses the cultural context by looking at both the countries from Geert Hofstede's five cultural dimensions. Each dimension can be easily linked to the negotiation styles of each country and the basis of their behaviour, attitude, response and strategy. A clear understanding of their individual scores on these dimensions can help us in comprehending their cultures and to draw conclusions.

Terms of Reference

From: A specialist in “Negotiation Strategies” in Japan and United States of America.

To: Anyone who wants to initiate a business with Japanese or American organization.

The paper informs about the negotiation styles adopted in Japan and America due to their cultural orientation. It deals more about cultural theories and cultural aspects of looking at negotiations. It gives answers about why they behave in the manner they behave during business dealings.

Overview of current situation

The idea of getting global is no more a new concept. However, businesses fail due to their erroneous assumption that success of business abroad depends on technical and professional expertise, job-related competence and how these skills could be utilized effectively (Gary P. Ferraro, 2002). It represents their inability to understand that it is the foreign ways of thinking and adapting that really makes the difference.

Although, it is quite difficult to completely predict or characterize any national or cultural approach in terms of negotiation, however certain generalizations can be drawn. These generalizations could act as guidelines but not recipes to perfect negotiation. Also, it is about how effective and less effective an approach is. Negotiators and Mediators can definitely take advantage of these generalizations while negotiating in Japan and United States of America.

Analysis of current situation

It is easy to negotiate effectively and efficiently at an unconscious level while dealing with our own culture; however when we leave a familiar cultural context and move into an international arena for negotiation, the whole process gets dramatic (Gary P. Ferraro, 2002). Here, we will take account of Japanese and American culture individually to understand each culture in depth and draw conclusions on how to deal with each culture while negotiating.

Once the decision has been made about the country where the business is to be started, PEST Analysis (John Kew and John Stredwick, 2008) is a perfect tool to make us understand the profits that could be made, analyze the driving forces and how these forces could influence their businesses. Thus, a prospective planning has to be done in order to avoid any problems that could have an impending effect on the business. PEST is an acronym for Political, Economic, Social and Technological factors.

PEST Analysis of Japan

Political Factors

  1. Japan is a parliamentary democracy under a constitutional monarch.
  2. The Prime Minister is the head of the government, who leads the Cabinet and appoints the Supreme Court.
  3. MITI (Ministry of International Trade and Industry) has been involved in the business and industry proceeding World War II and has helped Japan to acquire its strength. Therefore held a significant position in the past. It, though, doesn't have the same control due to the pressure from other governments and is less required as before.
  4. The government ministries act as intermediaries in industrial control.

Economical Factors

  1. Japan holds a second place in being largest economy of the world and third in terms of purchasing power parity.
  2. By market capitalization, Tokyo Stock Exchange stands the second largest in the world.
  3. Education system of Japan is very competitive. Literacy is almost 100% with 95% of population has a high school qualification.
  4. Since 1980, Japan (1990-91 and 1993) is one of the four countries who have scored highest in Human Development Index, which takes into account the education and health opportunities provided to citizens.
  5. Japan is one of the largest producers of motor vehicles, electronic goods and machine tools. It is one of the most technologically advanced countries in the world.

Social Factors

  1. Japan's population is 127 million approximately (2009 estimate).
  2. Japan's land is only 0.3% of world's land mass; however the population is 3% of the world's population. Thus, can be called a densely populated land. Being densely populated, group activity and conformity has proved to be successful in order to avoid conflicts.
  3. Shinto religion is the most common religion; however Japanese are very tolerant of religious differences.
  4. Though, there is no official religion, however Japanese is the official language.
  5. Majority of the population i.e. 60% is involved in trade or services; about 33% work of Japanese is manufacturing or construction and less than 7% is labour force or farmers, who has a disproportionate influence on politics.

Technological Factors

  1. Japan is very technologically advanced in the field of scientific research, machinery, chemicals, earthquake engineering, industrial robotics and automobiles.
  2. Japan is known to be the largest producer of automobiles.

PEST Analysis of United States of America

Political Factors

  1. USA is a democratic and constitutional republic. The President is elected after every four years and stands as Chief of state and head of the government.
  2. The corporate and property income tax rates of USA are comparatively higher than Europe, while consumption and labour tax rates are lower.

Social Factors

  1. The National language of USA is English; however there is no Official language. Spanish is second language which is spoken mostly widely.
  2. USA can be defined as a multicultural nation with various cultures, ethnicity, traditions and values.

Economic Factors

  1. Being third largest country by area in the world, it supports a population of 308 million people.
  2. USA has largest economy in the world. As per International Monetary Fund, the GDP (Gross Domestic Product) of USA of $14.4 trillion is the largest national GDP in the world.
  3. The literacy rate in USA is approximately 99%, however with an unemployment rate of 10.2% (Oct. 2009 estimate).

Technological Factors

  1. Since late 19th century, USA has stood first in technological innovation and scientific research.
  2. USA is backed by well-developed infrastructure and huge amount of natural resources and high productivity.
  3. Broadband internet is accessed by almost 50% of households in USA with very high possession technological consumer goods.

Before we look both the countries through Geert Hofstede's Five Dimensions (, let us first understand what they are and what each term means (Geert Hofstede,): -

  1. Power Distance Index (PDI): This index explains the inequality in power within the members of an organization, institution and family. These are categorized as “low-context” and “high-context”. People of low-context cultures consider everyone as equal. No one is superior to others in terms of age, birth, gender, social status, etc. This contradicts high-context cultures where people exercise their power with discretion.
  2. Individualism (IDV): It is the opposite of collectivism. It is the extent to which one considers himself/herself more significant than group, family or society. In individualist cultures, “I” is more important, whereas in collectivist cultures, more concern is shown towards members of the family, society or group.
  3. Masculinity (MAS): It is antonym for femininity. This dimension defines the distribution of roles and values within men and women of a society. Here, masculine is being assertive or task-oriented whereas feminine is being modest or relationship-oriented.
  4. Uncertainty Avoidance Index (UAI): This dimension can be defined as being direct or indirect in giving directions. People of uncertainty accepting cultures are hesitant in dictating or being dominant. They welcome different opinions, which is opposite to people from uncertainty avoiding culture, who are defined as emotional.
  5. Long-Term Orientation (LTO): As the name suggests, focuses more on building long-term relationship within society, business and group.

Solutions and Recommendations

How to be Effective while negotiating with Japanese? (Gary P. Ferraro, 2002 and Teri Morrison et al, 1994)

  1. Japan, being a high-context culture, younger and subordinates should show adequate respect and defer people who are older and at higher positions. Moreover, it is unusual for them to deal with females.
  2. Appreciating the team for their work is better than single Japanese worker of collectivist approach.
  3. They are very formal and like to dress in dark conservative suit. They are very serious on the job and thus, a proposal or presentation should not be started with a humorous anecdote or joke, as it could mean disrespect for the topic or the audience participating.
  4. Japanese focus more on long-term relationship. Therefore, in the first few meetings, they generally spend time to know the other party and their proposal. Ritual drinking during business entertainments is essential in order build a strong relationship and to know counterparts. Many Japanese believe that drinking alcohol give way to diffuse formality and rigidity.
  5. Many business people are now aware about the Western gestures and often greet with a handshake, however their handshake is not too firm. This does not mean any sign of weakness. Their own style of greeting is a bow. While trying to greet them with a bow, it should be done appropriately at a certain depth as it reflects status relationship.
  6. Japanese do not have an overly direct eye contact. However, a lack of direct gaze does not imply dishonesty or unreliability.
  7. For building the relationship further, exchanging gifts is common tradition. The wrapping and presentation style should be given attention. Moreover, it should be presented with both hands. If a gift is received from them, it should be accepted with both hands and should not be opened in front of them.
  8. It is also very important to learn the ritual of meishi, or business card. Cards are generally presented immediately after the greeting. The card should be offered with both hands and with the side facing Japanese. It should be accepted in the same manner and should be handled carefully. It should be studied carefully and then should be kept either on the conference table or inside leather card holder respectfully.
  9. “Connections/Intermediary” would prove to be very helpful in Japan. However, an intermediary should be the one involved in the dealings. Also, if it is not feasible, a personal call would be a better idea than sending a letter as a letter might not be answered.
  10. Japanese are not direct while refusing for the offer. So, when they say “I'll think about it” might mean “no”.
  11. Contract is generally taken as a final deal, but not for Japanese as they might renegotiate even after that and expect that the other party could. Strength of the relationship is given a very high importance.
  12. Be patient while negotiating with Japanese for two reasons. First, many Japanese companies make decisions by consensus, which is, obviously, a time-consuming process. Second, they arrive at a conclusion after a lengthy discussion process and any changes made at the negotiation table could lead to further internal “lengthy” discussions. Their locus of decision making lies within the group.
  13. Starting off with a very high price and later giving concessions doesn't work with Japanese as they might get suspicious of the cogent reasons of doing so.
  14. A question which is phrased negatively would be answered in a “yes”, if they agree on the statement, which is the opposite of how an English person would reply for that question. Also, double negatives and convoluted sentences should be avoided

How to be effective in while negotiating with Americans? (Gary P. Ferraro, 2002 and Teri Morrison et al, 1994)

  1. Being low-context culture, Americans key value is egalitarianism. For them, personal achievement and performance is more vital than one's age, gender, social class or family background. They are comfortable dealing with young men or women.
  2. Informality is the norm generally. They prefer themselves to be called by their first name and get down to first name calling basis immediately after meeting and greeting.
  3. While at work, conservative business attire can be seen, however in rural areas and small towns, dressing is less formal.
  4. Americans are too forward in getting down to business after an introductory meeting. They do give importance to know the other party, however, that is done while business proceedings. They tend to involve in small conversations as preliminaries are regarded as mere waste of precious time and money. Since professional life is kept separate from personal life, therefore, business entertainments are not quite common.
  5. A firm handshake, accompanied by a smile and/or nod is the standard style of greeting and meeting at business situations.
  6. Americans believe in direct eye contact and a lack of direct gaze represents suspicion and untrustworthy.
  7. Exchanging gifts in business world is discouraged in America. Also, if they are presented with a gift, it's their custom and tradition to unwrap the gift immediately.
  8. Meeting and greeting with Americans is not accompanied by an exchange of business cards. It is generally done at the end of the meeting and only in case they are to be contacted in future. Again, being casual, they immediately stuff the card inside their pocket without reading the contents.
  9. It is quite usual to do business with a stranger in America; therefore it is not necessary for the other party to look for an intermediary. A direct approach could work.
  10. Being low-context culturally, they are very straight-forward and do not even hesitate to say “no”. Thus, they appreciate directness and being frank in exchange of information and get suspicious of indirect and ambiguous communication.
  11. A great importance is given to legal aspects and written contracts as America being the most litigious society in the world.
  12. Their norm and principle of life is competition. Being the highest scorer of individualist society, decisiveness and excellence are appreciated. Also, business decisions take place at the speed of light.
  13. American negotiator accepts evidence based information to be viable, which could be accumulation of objective facts inspirited and vivified by visual aids. It should not be intended as rude as they interrupt and ask questions immediately when they are in doubt rather than keeping until the end.
  14. They understand and speak English adequately well and can handle complex business negotiations.


While concentrating on cultural implications on business, if we mix few general principles, negotiation faux pas could be avoided. Moreover, as international negotiations demand interdependence, trust and cooperation should be the formula. At times, business dealings loose because people get suspicious of other party's gestures.

It should always be kept in mind that “it's not about right way or wrong way, it's about their way”. Secondly, we deal with human beings after all. Therefore, exceptions are always there regarding personal preferences, mood, situation or past. Thirdly, in spite of these cultural differences, Western culture is balanced with Eastern and Southern values and norms, and therefore enjoys prerogatives of negotiation due to straight-forward communication and problem-solving approach.

We should not forget that change is a constant phenomenon. Negotiations strategies and practices are under global evolution.


  1. Maureen Guirdham, 2002, “Interactive Behaviour at Work”, 3rd Ed., Essex, Pearson Education Limited.
  2. Gary P. Ferraro, 2002, “The Cultural Dimensions of International Business”, 4th Ed., New Jersey, Pearson Education Inc.
  3. Terri Morrison, Wayne A. Conway and George A. Borden, PhD. 1994, “Kiss, Bow or Shake Hands: How to Do Business in Sixty Countries”; Massachusetts, Published by Adams Media Corporation.
  4. Richard R. Gesteland, 1999, “Cross-Cultural Business Behaviour”, Handelsholskolens Forlag, Copenhagen Business School Press.


  1. Sonja A. Sackmann, 1997, “Cultural Complexity in Organizations: inherent contrasts and contradictions”, Thousand Oaks: Sage.
  2. Myron W. Lustig, 2006, “Intercultural competence: interpersonal communication across cultures”, London: Pearson A and B.
  3. BREO Notes Negotiating Across Cultures: [assessed on 1/12/09].
  4. Negotiating Across Cultures: [assessed on 1/12/09]
  5. PEST Analysis of Japan - [assessed on 3/12/09 and 10/12/09].
  6. PEST Analysis of USA - [assessed on 3/12/09 and 10/12/09].
  7. Culture-Based Negotiation styles: By Michelle LeBaron, Julu 2003, [assessed on 2/12/09].